Power Lunch - Social Media Ruling, AWS on Implementing AI & Corporate Diversity Efforts 7/1/24

Episode Date: July 1, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody, alongside Kelly Evans. I'm Tyler Matheson. Glad you could join us on this Monday. Welcome to the second half of the year, July 1. Investors hoping it will be much like the first tech in the crosshairs in Europe right now, though. Meta's new model could be in breach of Europe's new law. And French antitrust regulators may be prepping antitrust charges against NVIDIA. Plus, with another contentious election season upon us, companies can expect to be caught in the crossfire of social issues and culture wars. And as recently, an example show the best thing they often do is to know their customers. Before that, let's check on the markets and let's check the numbers so far for the year. But today we see the Dow up a 10th of a percent similar for the S&P, the NASP leading the way with a half percent gain for the year. So far as Tyler referenced, we're talking about 14 percent gains for the S&P 500, 19 percent for the NASDAQ. On that note, let's bring in Mike Santoli. Michael is the biggest obstacle to a strong back half, just these sky high expectations. Yeah, Kelly. I think at least when it comes to earnings forecast, the expectations have been ratcheted pretty high.

It's a pretty daunting hurdle, at least from the outset, 9% second quarter aggregate S&P 500 earnings growth. And that has not come down over the course of the past three months. It seems as if analysts got the memo that companies have been beating by three to five percentage points in aggregate per quarter, so they haven't actually cut to lower the bar. That's one thing. I think the Treasury yield move is another that we have to be keeping our eye on as the market seems to be doing. doing today, especially considering that this lift in Treasury yields coming after some soft inflation numbers and also the economic data that's been a little bit deceleration mode,

I would say. Beyond that, though, the upward trend is quite strong. Even the average stock is not down. I mean, I think you could definitely talk about the narrowness of the rally. It's been an impediment to a lot of people embracing this bull market. On the other hand, it's not as if the rest of the market is really in free fall. And then I guess the final point is seasonals if you really believe that, you know, the first two weeks of July or two of the strongest weeks historically of the year, it's tough to fight at least knowing nothing else. So you say that earnings expectations are for 9% growth. Are there areas that people are worried about where they might not get 9% growth? Well, I think, Tyler, there's worry outside of the big

expensive mega-cap tech stocks that have been the source of much of the drive higher in the those estimates. So I don't think it's an across-the-board. Everyone assumes profits are going to be great, but it does seem as if looking at the reactions of some of the early reporters of the off-fiscal year reporters like Micron last week, it suggests anyway that things have to be pretty perfect in terms of guidance for the market to really embrace. Yeah. I remember one July when it was a long, long time ago, everything was going beautifully, everything was swimming, and Intel came in and missed, and the market sort of stumbled for the rest of the year as a result of that. Back when Intel was the bellwether, yeah.

When one of the bellwether's crumbles or trips a little bit, it can be, it can metastasize, right? Sure. Absolutely, yeah. Which is interesting, by the way, how the market has so far handled this little peak in Nvidia's share price, not so much the earnings estimates, but the fact that it peaked a couple of weeks ago and the overall market's trying to hang in there. All right, Mike, hang on. After a first blistering first half, fading inflation and a steady march higher in earnings, our next. guest says tech stocks are the final piece of the puzzle. Joining us now to explain. That's bringing Mike Bailey, Director of Research with FBB Capital Partners. Mike, welcome. Good to have you with us. How confident are you that earnings are going to come in at those lofty levels? Because in the

end, it's really earnings that drive stock prices. Absolutely. We feel pretty good. I think your last commentator, Mike said totally had a good point about expectations for earnings. I think that is really critical. It's not only companies coming in and delivering, but it's delivering what, delivering compared to what benchmark. So typically analysts tend to be a little too overconfident long term and they get scared short term. They take estimates down. We haven't quite seen that this time. So it could be a little bit less upside this earning season with this cycle. However, stepping back a little bit, taking a longer term view, companies generally are beating expectations. We may see a little bit less magnitude of those beats, but we still see

companies in pretty good shape. The economy is looking good, earning. generally growing. They're going to move it in the right direction. Tech stocks are that final piece. So we're sort of pulling all these things together and looking forward to the kickoff of the big earnings season here in a week or two. People, Mike, seem to widely believe two things. Number one, this is a real rally driven by earnings growth, expanding profit margins, but number two, that the summer often can make for some tough markets. Absolutely. And I think, you're feeding back into that is volatility. And you look at the VIX or the fear index. It's just, you know, it's basically nowhere to be seen. You know,

it's as if investors are really kind of pulling back. And you could worry about some complacency feeding into markets. You really haven't seen a lot of down 2% days, for example. So you're right. You are putting some pieces together for something that could be maybe not as exciting as folks would hope. One thing to make way to think about it, where it's Fourth of July week coming up, people are going to be seeing fireworks. What are investors looking for? So the big pieces that are out there, the economy, that's nice, fireworks looking pretty good, earnings are pretty good.

The last piece, the big finale is really tech stuff. and tech earnings. We haven't seen that yet. Investors are really waiting for that big finale, and that really could feed back into things. You mentioned that the Intel disappointment years ago, the big AI-related tech stocks. That's going to be the big final piece investors are watching for the next couple of weeks. We've spoken for two minutes, and I think for the first time in CNBC history, we have not mentioned the word interest rates or the Fed. Does the market have to have an interest rate cut to continue its march upward? So a couple ways to handle that. I think there needs to be a cut at some point, there could also be a bit of a sort of the Fed saying it's going to be next time.

It's going to be next time. If the market is okay with anticipating something, if the, you know, Jay Powell wakes up and says, forget it, we're done. Lock him in forever at high levels. That's a big problem. But I think Jay Powell is smart enough to keep just sort of easing that pain if he needs to delay the eventual. Because that's what it feels like is happening here, is that we keep not kicking the can.

That's too harsh a metaphor and a terrible cliche to boot. But at any rate, we. We keep moving the ball down the field. But it is keeping the interest rate argument in the stew somewhere. Agreed. And I think the flip side is, you know, in the meantime, we're sitting here with relatively high interest rates. What are companies doing? Oh, by the way, they're doing just fine.

They're growing earnings. And stocks are going up. So I think the situation is pretty good right now for companies and they're able to handle a lot of the higher rates. However, the longer this drags out, or if CFOs starts to say, hey, wait a minute, these rates are going to be high forever, and there could be a problem. But I think in the interim, as long as we're here, you know, could be a fewer months this year, maybe late this year, early next year. I think companies can handle that. And again, some of that messaging and kind of finessing that for J. Powell, that's going to be really critical in terms of the timing. Mike, what do you make of the kind of general mood of the public here as its own gauge of euphoria and whatnot?

So we have people broadly pessimistic and cautious about the broader economy, but very involved in the stock market. this morning, my handyman, I got talking to him, and he was bullish on Amazon, and he's bullish on Square, and he's got a whole trading setup for how he deals with oil as a sell signal for the S&P. And I'm just laughing. I mean, he was very sophisticated. And I've heard story after story after story like this the last couple of years. And even at a fundraising meeting the other night, instead of people asking how they could raise cash like usual to support this cause, they all said, well, what if we take trading profits? So how can it be that we have a public who's sort of pessimistic and conservative about the economy, very involuntary.

in the stock market, very sophisticated, almost making money in that way. What does all of this tell you, if anything? Well, your analogy there of the handyman giving stock tips. My first reaction is, uh-oh, here we go, you know, if it's that or the taxi cab driver, et cetera. However, I do think there's a bit of a difference between what people say and what they do. So if you look at consumer confidence numbers, have been pretty bad for a while. That's what people are saying, what are they actually doing? They're going out and buying stuff. And that's feeding back into companies and profits are doing pretty well. So I think there is a bit of a divergence there about the way people thinking and acting. In general, in terms of the big drivers of consumer sentiment, investor sentiment,

you know, generally it's incomes. Do you have a job or getting paid? Check the box, yes. And what does your balance sheet look like? What's the value of your home? What's a value of your stocks? That looks pretty good. So in general, I think that those are the big pieces supporting sentiment. So we'll have to see that plays out. The number from Chris Seneca at Wolf Research last hour was $30 trillion is the increase in housing and stock market wealth in this country since 2019. That's a big number. Absolutely. It's quite massive.

It's almost hard to kind of comprehend. To be fair, a lot of that is concentrated in some of the bigger groups out there at the higher end. However, you know, a lot of people, anybody on that auto enrollment for the 401K, they're seeing a piece of that that is helping them. It's feeding back into broader investor sentiment wants him to keep coming back and keep reinvestings. That is helpful. One of your picks is Amazon. Why?

So we like Amazon. I noticed Amazon and Apple are both up today. I would be buying Amazon hand over fist over Apple in general. Both companies are okay. But taking a look at Amazon, they're both trading at kind of a similar multiple. You look at the growth of an Amazon. This year, they're not going to cover off the ball. Even next year and the year after, 20, 25 percent growth. You're paying a sort of low 30s multiple for that. Also, you know, what else is interesting there? They've got three growth drivers. You're not putting all your eggs in one basket. E-commerce is doing. fine. They're kind of boosting margins there. Cloud computing, doing great there. And then you take a look at online ads. They've got three pieces of the puzzle doing quite well. Other tech companies are great. We own a lot of other ones, but Amazon's very compelling despite the move back up. We think you can continue to own it for no number of months or even years. That's what my handyman said as well. He was on Amazon. He was bullish on Amazon because number one picked more. So I feel like I'm talking to him again. It's bizarre. Yeah, do you do electrical work? Mike Bailey. Thanks, thanks. I'll give a call later on that one.

All right. Thanks. We have some big moves and bond yields today. The 10-year, especially re-approaching 450. Let's get out to Rick Santelli in Chicago for more. Rick. Hi, Kelly. It's been a wild session for Treasury yields. Yields in general.

Now, if you look at a two-year and 10-year on one chart for the last six hours, well, you should jump out at you right towards the middle of that chart is the big drop in yields that occurred at 10 o'clock Eastern. That makes perfect sense. We had the PMIs. And the PMIs were weaker than expected, but especially prices paid. Prices paid moved from 57 to 52.1. And that definitely incited buying, pushing yields down.

Well, that didn't live very long because right around 1030 Eastern, we saw the Supreme Court hit the wires in terms of the immunity decision. And I hate to get political, but yields moved up then. Now, why would they do that? Well, there's a couple of reasons being talked about. One is that that potentially could give a sweep to the conservatives, the Republicans, and that would lead to higher deficits. I think it's so much more simple than that.

Main Street media will definitely talk a whole lot more and write a whole lot more about debt and deficits with the Trump administration in the White House, especially considering the 2017 tax cut. So that indeed would be a motivation. Now, whether it actually politically happens or not, almost doesn't matter. If you look at a 10-year right now, it's on pace for a one-month high-yield closes. You see on that chart that starts at the end of May. Other things happen today as well.

The long end was leading the way on those rates higher. Just look at the last four sessions on the 2's 10 spread. It's basically gone from minus 50 to minus 29 basis points. A huge move. And if you open the chart up, should we see? stay at this level, that would be the least inverted in two months. Tyler, back to you. Interesting analysis. Rick Santelli, as always, thank you. Well, the new CEO of Amazon Web Services hitting the ground running, looking to woo startups in need of cloud services.

John Ford sat down with AWS CEO Matt Garman and has details next. Welcome back. And check out shares of Amazon. We were just talking about it. It's up two and a half percent today over that $2 trillion mark ended up 6% in the past week as it's built on its recent gains. Now the head of its cloud business is trying to woo Silicon Valley startups. Our John Ford just spoke with the head of AWS, in fact.

Yeah, just a few minutes ago, I spoke with new AWS CEO Matt Garman, first interview since taking the role last month. We talked about when he found out he was getting the job, the growth trajectory for AWS, and the significance of the intense interest in AI and how he says AWS's approach goes beyond the initial consumer-driven interest in ChatGPT.

Rather than a consumer application where we bolt on compliance and bolt on security and bolt on enterprise capabilities after the fact, we thought about it, like, how do we start with those things from the ground up? How do we give companies a secure platform to build on? Because even with all these new capabilities, security is still first and foremost in what they're worried about. How do we make sure that they can operate in an environment where they know that their enterprise data is safe. And then how do we give them a really rich set of services so they can

go build what they need to do? And the scope of things that customers are building is really broad. It's not just one application. It's not just a chat bot that you can put on your website and have talked to your customers, which is a very cool application, by the way. But many customers, if they stop there, they're not going to get the true value out of what this technology is bringing to them. We want a set of services that will help customers be able to build guardrails so they can build safe applications. Combine multiple models together where it's not just one model that's going to give them the best performance. It's going to be sometimes a small model and a big model and a variety of different providers that are bringing models together. It's capabilities like associating it with your enterprise data and a RAG index so that you can make sure that you have sources of truth when you're trying to answer questions.

Of course, rival Microsoft has open AI, but Garmini. is arguing AWS will be the enterprise-grade platform for customers to tap into multiple models for multiple companies, not just Open AIs ChatGPT. He also told me how his team's efforts to save customers money and cut their AWS bills a year ago built trust that's paying off more now and a lot more is coming up on overtime at 4 p.m. We also talked to him about that, Kate Rooney and Jordan Ovet's scoop about going through the valley and talking to startups, giving them a better deal on the ATS. He said, indeed, they are doing that because those smaller customers push and challenge

AWS always have. They also push and challenge bigger customers to adopt newer services. So the strategy there. I thought he was hoping if you get in with the startup, you know, you keep the business when they're a multi-billion dollar company or something. That too. That too. But if they push the bigger companies to move faster and perhaps do it with Amazon, it can

shift the narrative. All right, John. Thank you very much. John Ford. We'll look forward to more on that. on closing bell overtime, right? Yep. Fantastic. Coming up, a social media ruling, a blockbuster weekend for movies,

and vanishing content will cover all of this in a media edition of our power rundown. No power shortage here when we return. Welcome back to power launch. Oil up nearly 2% today, right around 83, a barrel. Could that be a sign of big things to come for energy stocks in the second half of the year? Pippa Stevens has been looking into that. Hi, Pippa. Hey, Tyler.

Well, enthusiasm for energy stocks. more or less petering out since the sector hit a record high back in April and more than half the group, now trading in correction or bear market territory. Now, part of that is thanks to a lack of upside catalysts with oil trading sideways and not gas tumbling. Still, Global X's Rohan Reddy saying the group offers high cash flow supported dividends and is a natural hedge against the potential oil shock later in the year. Plus, energy stocks have lagged oil itself this year, meaning there is a catch-up opportunity. Now, in terms of setup looking forward, Kinder Morgan, Occidental, Hess, and Conoco have the richest valuations, according to CNBC Pro's stock screener tool. On the flip side, APA,

Devin Halliburton, and Marathon trade at the biggest discount. And when it comes to Wall Street's top picks, Halliburton, APA, Cotera, and Conoco have the largest upside based on average price targets. The refiners are also one to watch. They've underperformed the last few months, but any pickup and gasoline demand could be a tailwind, and Barclay, reiterating its overweight on Valero. Yeah, oil has been pretty flat. I mean, it's been a real, all year, really. Yeah, I mean, it's been stuck in this range,

and there's this lack of upside catalyst. On the floor side, you have OPEC supporting any floor in the prices, but then you also have a cap in the sense that production's coming online from other places, the U.S., Canada, Brazil, etc. You mentioned hedge against an oil shock later in the year. The oil shock would come from Middle East? Middle East, potentially. We've seen an escalation there in the Red Sea.

We've kind of stopped talking about it in the broader new cycle, but there are still remains to be attacks. Their ships are still diverting. If it escalates, it could get a shock there. We could also see OPEC decide not to start unwinding their cuts, and oil has come down since they said they would. Then, of course, we could also get a very strong summer driving season here, which could boost oil. And then finally, any interest rate cuts could act as a tailwind. And so if oil does rise, then if you own the oil stocks, you have some protection from the impacts of higher prices. All right, Pippa. Thank you. Thank you very much.

Let's get to Julia Borset now for the CNBC News update, Julia. Well, Hunter Biden is suing Fox News over a fictional mock trial show focused on his foreign business dealings. The president's son accuses the miniseries of using intimate images of him without his consent, which he argues violates the New York revenge porn law. Fox aired the trial of Hunter Biden in October 2022, but later removed it under a threat of lawsuit by Biden's attorneys. The new California law took effect today requiring bars and clubs to offer test. testing devices to protect people from spiked drinks. All 2,400 establishments in the state with licenses to sell beer, wine, and distilled spirits have to abide by the rule. The testing devices are required to be free or no more than wholesale cost.

And the NBA League champions are up for sale. The ownership group of the Boston Celtics, led by billionaire Wick Grusbeck, announced its intention today to sell all shares of the team, citing a state and family planning considerations. The group's board says it expects the majority interest to sell this year or early next year with a balance closing in 2028. The group purchased the team in 2002 for $360 million. Back over to you. They will get a lot more than that when they sell. Julia, thank you. Nice to have you in the house.

Ahead on the program, tractor supply forced to abandon its DEI initiatives after receiving backlash from customers. If companies can't handle the heat, should they just stay out of the kitchen? Power Lunch will be right back. Welcome back to Power Launch, everybody, checking the markets right now, the industrials, the S&P, and the NASDAQ composite, all with modest gains there, a little bit off the highs. Remember, the NASDAQ was up nearly 20% in the first half of the year, adding to that by two-thirds of percent today. Meanwhile, Starbucks was down nearly 20 percent over that time. Now the company working to improve stores with a new training system rolling out this summer,

making tweaks to help address ongoing bottlenecks in stores, including long wait times for beverages and handling unexpected surges in traffic. Kate Rogers went to Seattle for a firsthand look. Kate, what did you find? Hey there, Tyler. It's called the Siren Craft System. It's now in more than 1,100 locations. At Starbucks across the country, these are behind-the-scenes changes meant to make a material difference. There's now a play-call role in place who steps away from production and helps to solve for log jams and cafes like restocking cups or helping when an unexpected crowd arrives.

There's also changes to the order in which beverages are. made. Previously, cold beverages were prioritized from start to finish, even if a hot beverage order came in first. This could create traffic jams in the drive-thru, for example, if someone ordered one of each, the cold would come out first. We now actually have proper sequencing between our hot and cold bars, especially as cold bars becoming as popular as ever, to really have a consistent experience for the customers. So we're actually making them in the order they're coming in. The company says it's seen meaningful. improvements in wait times where this has been implemented so far. There's also an equipment

component which will roll out on a smaller scale featuring a custom ice dispenser, milk dispensing system, and faster blenders that will reduce steps for baristas and get drinks to customers faster. That's all key as recent challenges, of course, have led to Starbucks cutting guidance in its most recent quarter in April with U.S. traffic and same store sales falling and occasional customers, very important coming in less. Also key, guys, because beginning in July, starting today, they're going to open up the app to non-rewards members. So the company and its executives do believe that will also boost traffic in orders as well. Back over to you. Am I right or wrong, but my impression is that there may not be as many employees in the stores at any given time,

and that that may be contributing to what I have found personally, and you just reported, a sort degraded customer service experience. So certainly staffing and scheduling kind of depends on location, Tyler, but you're getting at one of the key points. with this siren training system is that they want to make sure they're able to better handle unexpected surges in traffic. Starbucks maintains that it has made really good improvements in terms of staffing and scheduling in recent years, but that has also been a point of contention over the past few years, particularly with baristas who have sought to unionize with workers United. It's an ongoing struggle.

Yeah, and as you say, online orders, they need to be there and be ready when you expect them to be. And also the cleanliness of the stores, as they, I just feel like maybe they haven't kept up as much as they could. Anyhow, they're on the case. Thank you much, Kate. They are. Thank you. Speaking of Starbucks, the company recently celebrating Pride Month successfully, it's a change from last year when some of its U.S. stores came under fire for not allowing

pride decorations. Meanwhile, Tractor Supply is backing off its DEI goals and initiatives following conservative backlash. Among other things, tractor supplying now says they'll stop sponsoring Pride festivals. With the Culture Wars in America showing no signs of dying down, what does this tell other? companies about taking a stand on social issues. Americus Reid is a marketing professor at U-Pens-Warton School of Business and a CNBC contributor. And Americus, it seems, as we indicated before, that it's really important for these companies to know thy customer.

You're 100% correct, Kelly. I think that's the mantra. And if you're going to bill yourself as the country's largest rural lifestyle retailer, then you better know a little bit about what that rural lifestyle actually means. So in some senses here, you know, you have to be a lot of it. to be able to craft a position around ideological viewpoints that are consistent with your customers. And if you're not able to do that, it looks quite bad if you have to backtrack and kind of pull away from those positions because it's called taking a stand for reason. So this is not a good look.

I wonder if a company that has made, let us say broadly, DEI or inclusivity, a part of its persona, its DNA from the early days of the founding of the company, gets maybe with some customers a pass compared with a company that comes to that particular party later. Am I on to something there? You're definitely on to something there, Tyler. It's 100% correct. What it points to is the importance of the track record.

So if you're this kind of company who decide that I want to dabble in this sort of ideological positioning viewpoint, DEI is important, you have to demonstrate consumers that this is something that is a lot. authentic and that you've been doing for some period of time. I think if you do that, then you're essentially concretely signaling to the marketplace that you are that company. And so when your values, your mission, and all of these positions that you take actually hit the marketplace and people

react to them, they're reacting to them just like you said, Tyler, in the context of understanding that you are that kind of company that you say you are. Do you think America's that companies are backing away from, you know, fighting in the culture wars? I've heard a lot of people say when comes to the election, for instance, they're telling their employees they're not going to take a stand. Yeah, it's an interesting question, Kelly. I think that the decision calculus has to be one that is both moral and economic. And as I said earlier, and as you and Tyler were pointing to, if you know your customer that you understand what you're able to do to be able to connect with their identity, this is all about identity. And so if you want to make an argument that you're synchronous with the

values of your customer, then that's something that you understand and you're taking that risk. Some companies will say, I don't want to do this. I want to stay out of this because this is not at all related to my business making revenue generating model. That's fine too. But the idea is, if you're going to dabble your toe in this sort of pool of ideological positioning, DEI, abortion rights, voting rights, all of these different things, then you better make sure that when you do it, basically you're all in and that this is a position that you're going to be

willing to lose customers with and live and or die by the sword. I may not have all of my facts correct here, but as I understand it, in the tractor supply case, the uproar to the extent that there was an uproar had to do with celebrating Pride Month. It was sparked, let me say, shall I say, by a former Hollywood director who has turned into a political activist. This also seems to me to be that, therefore, an example of the vulnerability, for lack of a better word, of companies to a single activist or agitator, or maybe a group of activists or agitators, on social media. It shows how social media can create a movement or an anti-movement. That's 100% correct, Tyler.

You touch on something that's very critical here, and that's the power of the two-way communication that happens between consumers in real-time and with brands when brands make decisions. And so the social media has amplified and accelerated this communication, and you're going to get moral outrage, and you're going to know about it very quickly in social media whenever you're making one of these particular positional stands or taking a stand in an issue like this. And so you have to make a decision

if you're a brand product service organization, is that moral outrage rising to the level of a movement where I might actually lose more customers than I could gain on the basis of these ideological points of view. And that's the decision calculus that you basically have to do if you're going to be effective at this kind of thing. It's kind of an observation more than anything,

Americus, but it seems as though the culture wars are resulting in different corporate structures for those who would identify as maybe blue or red, for lack of a better term. I mean, some are literally going to have DEI departments and some are not. And this is just manifesting in a way, which I don't think the workplace has really had to grapple with in decades past. That's 100% correct, Kelly. And the other thing that I think is interesting about your point is that you're going to get these very disproportionate structures in organizations. However, you're also going to get a very clear signal to the marketplace as the VATTS. So when a person is making a decision to work for a specific company, they now have the ability to say,

you know what, I'm going to choose potentially as an employee to choose a company that I think has the values that I share. And that actually enhances and improves their quality of workline because they believe they're not just going to work, but they're also going to a place that supports their beliefs and their values and their ideological points of view. All right. America, thanks for joining us today. We appreciate it. Thanks a lot. Appreciate the opportunity. And still to come. The EU targeting meta, the stock slightly lower today, but still up big for the gear. We've got more on that one next.

All right, welcome back. Three stories across every media, medium. The phone screen, the silver screen, the TV screen, first. The Supreme Court ordering a new look at social media laws in Texas and Florida. Plus inside out, topping a billion dollars at the global box office in Paramount, removing some content from the digital streaming platforms. Julie Borsen here to break down all three. with that SCOTUS ruling. Explain what the Supreme Court did and what was at stake in this, I believe it was a Texas law and one other state. Texas and Florida law. So the Supreme Court decided not to rule. It would have been a much

bigger deal if the Supreme Court had come down with a ruling on these Texas and Florida laws. These laws were aiming to protect conservative voices on social media from content moderation. So it would have been a much bigger deal if they said, yes, you were allowed to prevent content moderation on the social media platforms, which the tech... In other words, in simple terms, Meadow can't kick you off or can't muzzle you for a political viewpoint. But the Supreme Court said that we're going to kick it back down to the lower courts. We're not going to make a decision.

So ultimately, there was no decision. Yes. But the fact that they didn't make a decision is probably a good thing for the social media platforms because if they had said, sure, go ahead. you're allowed to have this law preventing content moderation. That would have been more restriction on the social media platforms. I've always thought of social media companies as effectively, this goes to the heart of the debate, really, as publishers. And no one has a right to force a publisher to publish something.

That's the question of free speech. Are they publishers? Can you treat the publishers? Or are they a billboard? Are they a utility? There are a lot of questions about how we should treat the social media platforms. and ultimately the trade associations representing the social media platforms said that these laws in Florida and Texas were a violation of free speech. And that's how this all escalated to the Supreme Court. But there is other news today out about meta.

And it's the fact that the EU is charging meta for violating its digital competition law. And what the EU is saying is that meta is offering the option of either paying a subscription not to have ads or you have ads which use your data. to target ads towards you. And META is saying, by offering these two options, we are complying with EU laws, subscription to get away with advert, to avoid advertising. And sharing of private data. Yes. And so what the EU is saying is that we think this is not in compliance with our laws. So META sent as a statement saying they did indeed think this is entirely in compliance

with the EU's regulations. So we'll see how this escalates or doesn't escalate. All right. Let's move on then to the box office. This, you know, why do I have to, I have to, I have a famous way to. bad experience. Okay, Disney's Inside Out is becoming the first member of the billion dollar club since Barbie. It's a simple news story, you know. And it is, by the way, one of the stories, it's a sequel, but still one of the more original kind of films that we've seen hit theaters

in recent years. But here's why this is big news. After Barbie, last year, Barbenheimer, people were really excited that the box office was going to come back. But this year, the year to day, box office has been a huge disappointment. Before this weekend, the box office year to date was down 21% from last year. And remember last year still wasn't at 2019 levels. Is that because of the strikes, as I understand, it pushed a lot of content. It pushed a lot of content, but there's also a lot of concern that maybe people got out of habit of going to the movies. But the good news is this weekend brought the box office up. So now the box office is only down 19% year-to-date going into this weekend. It was down 21% year-to-date. But the good news is that people will come back. If it's a movie

they want to see, a franchise they're very excited about. We saw The Quiet Place Day 1, which was a sequel in the Quiet Place franchise. It had the best opening of any movie in that franchise and brought in $98 million globally. So we're seeing people come back. There's a lot of enthusiasm about Despicable Me Four, which is going to be open over the long holiday weekend. So the good news is the box office is inching back. But people won't come back just for anything. Inside Out 2 has been out how many weeks? I believe it's about three weekends now. We're going into the fourth weekend. And it has topped a billion dollars faster than any other. And it's top to billion dollars faster than any other animated movie has ever hit a billion dollars. It's a Pixar movie. It's a Disney Pixar movie. First time

they've had that in a long time. Well, this is the first time Pixar has had a billion movie since 2019. And the pace, this pace at which it got to a billion dollars is really notable. It shows that once a movie has momentum, it really takes off. All right. Let's go on to Paramount purging some video clips and other content from streaming and digital platforms, creating outrage and worry online about potential content preservation. So, ComedyCentral.com had a massive archive. If you want to watch an old John Stewart show, you could go back for decades and find these old episodes. But Paramount, as we know, is under a lot of financial pressure. We've been talking about all the chaos going on with Paramount Global, selling, deciding not to sell.

And ultimately, this is all designed to drive people to Paramount TV. They want people to subscribe to Paramount Plus. They want people to either be watching television or subscribing to their subscription channel, and they weren't sufficiently monetizing these old archives on ComedyCentral.com. So this is a strategic decision. They may continue to make changes as they try to figure out the best way to monetize their current shows, but also the archive. And ultimately, the archive wasn't making them enough money. This is great news for them, then, with the great media attention. Because if we're talking about a raise awareness, the stock is still down almost 3% today.

It's over $10 still. But that's exactly the play. You'd hope that if people really want those archives, they're really willing to pay up for them. And they'll get John Stewart. They get Colbert. They get other. But also, you want people to watch the newest shows because that's where Paramount. is going to make the most money in terms of the ad revenue.

Julia, nice to have you in town. It's great to be here. Appreciate it. Good to see you. Shares of Tesla are meanwhile on the rise, getting a pop ahead of their delivery numbers. And despite expectations for a slump in sales, we'll trade it. And three other names in three stock lunch. Stocks up 7%. Stay with us.

Time for today's the three stock lunch. We're taking a look at some of the top calls of the day to kick off the week. Here with our trades is Jerry Castellini. He's president and CIO of Castle Arc Management. Good to see you, Jerry. Let's start with Tesla on a big 7% pop today. Wells Fargo is still sticking with its underweight on the stock, but they added it to its tactical ideas list for the third quarter. Are you a fan of Tesla here, Jerry? So I'm, yes, long term. The short-term game here, I still think is going to be dominated by this interplay between all the capacity for pure EVs

that are coming on in the United States versus the much longer term and much more encouraging story that Tesla has. And if you think about it, today it's big move is both short covering and good numbers in China. I don't think the market's paying much of anything for China numbers because they're too volatile. And quite frankly, I just don't see today you're going to be able to solve the equation of all of this new capacity that's hitting the market in the pure EV market in the U.S. I would be a seller here on that premise. At the same time, don't give up on this name. When you think about it, at some point, you're going to be able to put an intelligence, advanced computing a variety of different ideas on Tesla that isn't being captured today

and isn't going to be dependent on EV sales. That's coming. I think that's in the next nine months. basically think of it is GM doesn't have an LLM that they're trying to construct. They're not building out data centers. That's going to pay us all as tests the long-term shareholders. But today, I wouldn't be chasing this at all.

All right, let's move with up next to Wells Fargo sticking with an overweight on McDonald's as the firm sees potential upside for the fast food chain in the second half. Shares down more than 15% year-to-date. Your take on McDonald's? Yeah, I think for McDonald's to come in 15% in a more benign economic and consumer spending outlook,

it should be enough, a big, dominant, great company. Think about the way they're positioning themselves strategically. I mean, I use the analogy, Walmart has been very successful in its history of leaning into tougher consumer times with their pricing model. And in a way, this is really with the value menu, this is what McDonald's is doing right now as well. They've paid for that by people pulling their estimates over the next few quarters because they're giving it back in margin. But if you go back over time, you'll see that the big dominant players in most businesses tend to outperform after you get through these cyclical hiccups.

And you really have to call this a much tougher economic environment going forward, which we do not, for this not to be a great entry point for McDonald's. All right. McDonald's leaving it there. The final name is Birkenstock, whose shares are rising earlier. They're slightly higher now. But UBS, this was the call today. They upgraded the stock to buy from neutral,

hiked the price target to 85 from 52, citing their success in their expansion strategy. A lot more love for Burke these days. Are you among them? So full disclosure, I do not own a pair. nor do I intend to any time in the near future. Me either. But I know, pardon? Me either.

Tyler, you probably have a couple pairs. No, I got ugly toes. Same. That's all there is to it. That said, the way generally investors succeed with fashion names is you let the time run out of the clock on their fashion. These guys have hit it very well since they've come public. They're now in a very desirable place. desirable place where the market is giving them credit for the direct-to-consumer side. And I think we should

let that clock run. I know I appreciate the fact that it's very well captured in a really fat, healthy 40-multipal. But at the same time, we don't know how big this market can be. And when you see success like this, and it's not F. Leisure, right, if they're not shopping at Nike for gym shoes, maybe these funny things on your feet are what everybody wants to wear. All right. There you go. He likes the stock, leaving the shoes. Jerry Castellini, thanks so much for joining us today.

We appreciate your time. All righty, folks. Closing time is next, but first, remember this. You can always hear us on our podcast. Be sure to follow and listen to Power Lunch wherever you go. We'll be right back. All right, let's check the Dow right now. It is up but just barely 16 points, about four one-hundredths of 1% at 39-135.

It was up 320 points at its peak right before 10 a.m. We've only got a couple of three hundred and. a minute's left in the program. Several more stories we'd like to tell you about. So let's get to it. Chewy, turning negative as the boost from Roaring Kitty's new stake diminishes. It had been higher by as much as 10%, but now down a little bit. The SEC filing showing that Roaring Kitty about over 9 million shares amounting to a 6.6% stake in the company worth nearly $250 million. The stock is down about a buck and a half or 5% today as some of that bloom goes. off the road.

Still up from May, but he's, you know, he'll do fine in the long run if they can turn this around. If not, it's going to have to be back to boring, kitty. New hires are putting more of each paycheck into their 401ks, not necessarily by choice. Nearly a third of companies using automatic enrollment, now start workers saving 6% of their salaries or more about double the share of organizations that did so a decade ago according to Vanguard. So this would be when you come in, you automatically default to 6%.

Yes, which is a big number. But now that I'm coming on the other end of this 401, not the other end, but I mean, I'm getting there. And I'm going, you know what? I'm glad I did that for all those years. I really am. I hope everyone else does it too. If you don't get it, you don't miss it. If you changed from 3% to 6%, you would notice it.

If you started a 6%, you probably don't notice it as much as you otherwise might. All right, and starting Monday, the Food and Drug Administration will wield new regulatory powers over the makers of lipstick, shampoos, baby wipes, and other cosmetic products. This is part of a law requiring companies to clearly label allergens, registered. their facilities and disclose every product they sell. It is during a time when regulatory agencies are being reined in by the Supreme Court, an interesting sort of counter move on the part of the FDA to extend its reach for cosmetic. Oh, sure. And I'll be curious to see how quickly this kind of works its way back through, maybe a boon for the package makers companies. All right. So we got the Dow basically flat on the day, stocks otherwise moving a little bit higher. We're glad you could be

with us today. Yeah, I'm hopeful see the back half. Can it rival the first half? half of the year. A slow start could be a strong finish though. There you go. All right. Thanks for watching Power Lunch everybody. Closing bell starts right now.